[New York Market Watch]Nvidia Earnings Anticipation Drives Market Rally—Bonds Fall, Dollar Strengthens

(Seoul=Yonhap Infomax) International Economics Department = On the 19th (U.S. Eastern Time), all three major U.S. stock indices closed higher in New York financial markets. Despite ongoing debates over an artificial intelligence (AI) bubble, the market rebounded on bargain-hunting following recent excessive declines and renewed buying in tech stocks. However, volatility remained elevated amid caution ahead of Nvidia’s earnings and diminished expectations for a Federal Reserve rate cut in December.

U.S. Treasury prices fell, led by weakness in short-term maturities. The Bureau of Labor Statistics (BLS) canceled the October employment report, and the Federal Open Market Committee (FOMC) minutes for October were more hawkish than expected, increasing the likelihood of a Fed rate hold next month and putting pressure on Treasury prices. The yield curve flattened (bear flattening).

The U.S. dollar index (DXY) rose for a fourth consecutive session, surpassing the 100 mark for the first time since the 6th of this month, supported by rising Treasury yields and growing expectations of a Fed rate hold.

New York oil prices plunged more than 2%, ending a three-day winning streak, as reports emerged of renewed U.S. efforts to end the war in Ukraine and gasoline inventories rose.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) surged 1.03 points (4.17%) to 23.66.

The BLS announced the cancellation of the October employment report due to the federal government shutdown, which prevented the household survey used to calculate the unemployment rate. The establishment survey, which covers nonfarm payrolls, will be released with the November report.

After the market closed, Nvidia reported earnings that beat expectations. Adjusted earnings per share (EPS) for Q3 came in at $1.30, above the LSEG consensus of $1.25. Revenue reached $57.01 billion, exceeding the forecast of $54.92 billion, up 22% quarter-on-quarter and 62% year-on-year. GAAP gross margin was 73.4%. Nvidia projected Q4 revenue between $63.7 billion and $66.3 billion (midpoint: $65 billion), above the market consensus of $61.66 billion, with a projected gross margin of 74.8%.

Equity Markets

On the 19th (U.S. Eastern Time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed up 47.03 points (0.10%) at 46,138.77. The S&P 500 gained 24.84 points (0.38%) to 6,642.16, and the Nasdaq Composite rose 131.38 points (0.59%) to 22,564.23. The Dow and S&P 500 ended five-session losing streaks, while the Nasdaq snapped a three-day decline.

Early in the session, bargain-hunting emerged as investors viewed recent declines as excessive. The S&P 500 rose as much as 1.09% intraday, and the Nasdaq climbed 1.73%. The Philadelphia Semiconductor Index, heavily weighted toward AI and chip stocks, jumped as much as 3.07% at one point.

Chris Senyek, chief investment strategist at Wolfe Research, said, “At least at this stage, concerns about an AI bubble bursting are overblown. We continue to buy AI stocks on pullbacks.”

However, as caution grew ahead of Nvidia’s earnings, the market gradually pared gains. Adam Turnquist, strategist at LPL Financial, noted, “Investors will be closely watching how CEO Jensen Huang guides data center revenue, especially after he revealed $500 billion in orders for this year and next.”

Following the BLS announcement canceling the October jobs report, all three indices briefly turned negative, as hopes for a ‘weak labor market → rate cut’ scenario faded.

The FOMC minutes released the same day were also hawkish, with “many” participants expressing concern over inflation and supporting the current rate level. According to CME FedWatch, as of 15:56 in New York, the federal funds futures market priced in a 33.6% chance of a 25bp rate cut in December, down from 50.1% previously.

Late in the session, renewed buying in tech stocks, led by Nvidia, helped the market close higher. By sector, technology (+0.93%), communication (+0.72%), materials (+0.46%), financials (+0.42%), and industrials (+0.36%) outperformed, while energy (-1.30%), utilities (-0.81%), and real estate (-0.79%) lagged.

Nvidia, a leading AI stock, rose 2.85%. Alphabet (Google’s parent) gained 3.00% after its newly launched AI model Gemini 3 received positive market feedback. Tesla climbed 0.68% after Arizona state authorities approved its ride-hailing service for robotaxi operations. Amazon (+0.06%) and Apple (+0.42%) also rebounded.

Target fell 2.77% after its earnings missed expectations, while discount retailer TJX, parent of TJ Maxx, rose 0.16% on better-than-expected results. The contrasting performances signaled that U.S. consumers are increasingly turning to lower-priced goods amid tighter budgets.

The CBOE Volatility Index (VIX) surged 1.03 points (4.17%) to 23.66.

Bond Markets

According to Yonhap Infomax’s overseas rates screen (screen no. 6532), as of 15:00 (U.S. Eastern Time) on the 19th, the 10-year U.S. Treasury yield was 4.1320%, up 1.10bp from the previous day’s 15:00 close. The 2-year yield, sensitive to monetary policy, rose 1.70bp to 3.5980%. The 30-year yield climbed 0.90bp to 4.7510%. The 10-2 year yield spread narrowed from 54.00bp to 53.40bp. (Bond yields and prices move inversely.)

U.S. Treasuries were initially supported by risk aversion ahead of Nvidia’s earnings, dubbed “the world’s most important stock.” However, as the Nasdaq rallied after the market opened, yields rebounded, with the 10-year hitting an intraday low of 4.0970% before reversing higher.

Following the BLS announcement, the probability of a December rate cut dropped to the low 30% range. Kim Rupert, managing director at Action Economics in San Francisco, said, “Several Fed hawks have said they want to see evidence for further rate cuts in the absence of data. The cancellation of the October jobs report likely reinforced market concerns that there will be no rate cut.”

The FOMC minutes released at 14:00 stated that “many” participants suggested maintaining the current target range for the federal funds rate for the remainder of the year. “Several” participants favored a December rate cut, but they were outnumbered by those supporting a hold. The minutes also noted that some, including Kansas City Fed President Jeffrey Schmid, explicitly opposed a rate cut.

After the minutes were released, Treasury yields, especially the 2-year, moved higher, with the 30-year briefly spiking to 4.7600%.

The 20-year Treasury auction at 13:00 saw tepid demand, with a yield of 4.706%, up 20bp from last month’s 4.506% and the highest since August. The bid-to-cover ratio fell to 2.41 from 2.73 previously, below the six-auction average of 2.47. The auction yield was 0.2bp above the when-issued yield, indicating weaker-than-expected demand.

According to CME FedWatch, as of 15:47 in New York, the federal funds futures market priced in a 33.6% chance of a 25bp rate cut in December, down sharply from 50.1%. The probability of a rate hold surged from 49.9% to 66.4%.

Foreign Exchange Markets

According to Yonhap Infomax (screen no. 6411), as of 16:00 (U.S. Eastern Time) on the 19th, the dollar-yen exchange rate stood at 156.963 yen, up 1.433 yen (0.922%) from the previous New York close of 155.529 yen. The dollar briefly topped 157 yen, marking its highest level since mid-January.

The euro-yen rate rose 0.810 yen (0.450%) to 180.91 yen from 180.10 yen, surpassing 181 yen intraday for the first time ever. This means the yen’s value against the euro has fallen to its lowest since the euro’s launch in 1999.

The euro-dollar rate fell 0.00545 (0.471%) to 1.15262 from 1.15807, declining for a fourth straight session. The DXY rose 0.602 points (0.604%) to 100.190, topping 100 for the first time since the 6th of this month.

The probability of a Fed rate cut next month, as reflected in rate futures, plunged to the low 30% range, with the likelihood of a hold now dominant. The FOMC minutes released in the afternoon confirmed that the hold camp is numerically superior.

Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, said, “The FOMC is far more divided than usual on the next policy step, and today’s BLS announcement will reinforce a cautious stance.”

With Japanese Prime Minister Sanae Takaichi expected to announce a major stimulus package this week, speculation grew over possible intervention to stem yen weakness. Shaun Osborne, chief FX strategist at Scotiabank, said, “In the short term, the yen continues to underperform and is diverging significantly from fundamentals. Japanese authorities are clearly watching the yen closely.”

The pound-dollar rate fell 0.00970 (0.738%) to 1.30496, as October CPI met expectations and the Bank of England’s rate cut prospects for next month increased. Caution also rose ahead of the autumn budget to be released on the 26th. UK Labour Party leader Keir Starmer sparred with Conservative leader Kemi Badenoch in Parliament over the budget, stating that the Labour budget would be based on “Labour values” and reiterating a commitment to tackling inequality.

The offshore dollar-yuan (CNH) rate rose 0.0080 (0.113%) to 7.1180.

Oil Markets

On the 19th (U.S. Eastern Time), December West Texas Intermediate (WTI) crude futures on the New York Mercantile Exchange fell $1.30 (2.14%) to $59.44 per barrel, closing below $60 for the first time since the 13th and marking the lowest settlement since then.

Axios reported on the evening of the 18th that the Trump administration is secretly discussing a new peace initiative to end the war in Ukraine with Russia. The plan reportedly consists of 28 items across four categories: Ukraine’s peace framework, security guarantees, European security, and future relations among the U.S., Russia, and Ukraine. Axios said Trump’s envoy Steve Witkoff has held extensive talks with Russian President Vladimir Putin’s special envoy for foreign investment and economic cooperation, Kirill Dmitriev. Reports also surfaced that Trump dispatched a delegation of senior Pentagon officials to Ukraine.

WTI extended losses throughout the session, at one point falling more than 3%. Scott Shelton, energy expert at TP ICAP Group, said, “Considering the volume of seaborne oil, floating storage, and sanctioned oil, if all sanctioned Russian oil hits the market, prices could drop to the low $50s.”

According to the U.S. Energy Information Administration (EIA), U.S. crude inventories for the week ended the 14th fell by 3.426 million barrels, the first decline in three weeks and much larger than the market expectation of a 1 million barrel drop. However, gasoline inventories rose by 2.327 million barrels, ending a five-week streak of declines and exceeding the expected 600,000-barrel increase.

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Note: U.S. Treasury price data is as of 15:00 local time and may differ from closing prices. Final closing prices are available in the '[U.S. Treasury Yield Electronic Closing]' article released at 07:30.